Over the last week the revelation that the Board of Directors of the National Gas Company (NGC) had sought and received, at least in principle, an indemnity (protection against loss or financial burden) from the Dr Keith Rowley administration for having spent more than a quarter billion dollars on what now appears to be a failed attempt to rescue Atlantic LNG Train 1 has caused great concern among many in the country.
Much of the disquiet stems from what appears to be government making the rare move to indemnify directors of a state-owned enterprise even before an investment is made and the stench that these directors were at least trying to protect themselves should the money be lost.
The fundamental question at play here is: if the directors believed that the investment in Train 1 was a good one why would they want to indemnify themselves?
The only logic is that they understood the extent of the risk, or were coerced by the Government to make the deal and wanted to ensure they did not end up like the late Malcolm Jones, having to spend millions of their own money to defend themselves against the might of the State should there be a change in government.
That the Rowley administration would agree to such an indemnity request is itself questionable and raises the issue of its commitment to the highest level of corporate governance and, whether in granting this get-out-of-jail free card, it is in fact sending a message that spending and losing over $250 million of the ultimate shareholders of the NGC--the people of T&T--money is not an issue.
We have seen the public relations offensive of the Government.
We have seen the attempt to blame the multinationals for our missteps. Yes it’s the colonial masters’ fault.
The 1970 black power movement and the important issues it dealt with and our march for independence must not be seen as a crutch to avoid taking responsibility for what we are doing today.
These are the facts and no amount of obfuscation by the government and its supporters will change them.
On December 3, 2020, bpTT wrote to the National Gas Company and said it would not be able to provide its daily contracted quantities (DCQ) for 2021. BpTT also informed the NGC that it may want to take this lack of gas into account in deciding if to invest in the Train 1 rescue Package.
Another fact is that on May 10, 2019 the Business Guardian reported that bpTT’s infill drilling programme had failed and it would lead to a significant reduction in the company’s natural gas production.
In his mid-year budget review, days after the bpTT announcement of the bad results from its infill drilling programme the Minister of Finance Colm Imbert told the Parliament that it was only one well that failed and that there was no cause for concern.
This has been part of the normal strategy of the Rowley administration to pretend to the country that everything is fine and it’s the media and others who are trying to embarrass the country or the administration and it should be trusted because it has the information and the ministers and some of their supporters alone went to school and know everything.
On December 3, the late Energy Minister Franklin Khan told the Parliament that Train 1 will not be shutting down as was reported in the Business Guardian days before and that sensitive negotiations were happening.
Khan noted: “Only last night (December 3) the shareholders of Atlantic Train 1, approved the turnaround (TA)”.
According to Khan, the turnaround would take place in January and would keep it in an “operations ready mode” for all of 2021 into 2022.
When asked if the shareholders had agreed to supply gas to Train 1, Khan said: “The issue of the operability of the plant will depend on the TA.”
On the gas supply side, Khan noted negotiations are still underway to source a continued supply because the train was normally supplied 100 per cent by bpTT.
The Former Energy Minister said: “BP is saying that they have a shortage and they cannot supply, but BP is not the only supplier of gas in Trinidad so we are in some sensitive negotiations, let me make that point, with upstreamers to supply gas to Train 1.”
Yes it is always about sensitive negotiations.
Fact again, the NGC which owns 10 per cent of Train 1 and has little of its own gas decided to pay the US$24.7 million or $168 million to do the turnaround that Khan spoke about on December 3, 2020.
By letter dated February 8, 2021, the Board of Directors sent an indemnity for approval of the Minister of Finance.
The indemnity seeks to absolve the Board from any responsibility should the NGC lose the $168 million it invested, knowing from the start that bpTT which supplied all the gas in Train 1 did not have the hydrocarbons nor did the NGC.
On February 25, the board again wrote the Minister of Finance asking to approve it spending another US $40 million or $272 million behind the Atlantic LNG rescue deal.
The board wanted further protection from the Government for its decision to spend what would now total $440 million with not a cubic foot of LNG produced from the plant since December 2020 and no gas in sight. The additional $272 million was to pay maintenance fees for the plant.
Another fact is the NGC breached its own agreement with Atlantic LNG to pay for the maintenance of the plant and it appears that by June the board finally realised it could no longer throw good money behind bad and stopped paying for the maintenance of Train 1.
By letter dated August 3, Atlantic LNG’s Chief Executive Officer Ronald Adams wrote to the NGC President Mark Loquan and informed him due to the non-receipt of payments for June and July the deal to keep Atlantic ready for operations had been terminated.
Gregory McGuire, a well respected energy consultant, former NGC employee and consultant for the NGC and head of our Transparency Initiative, the EITI wrote a piece in defence of the NGC.
His arguments were essentially that the NGC and government’s interest are not necessarily aligned with the multinationals. We could accept that.
McGuire also argued that bpTT and Shell make supranormal profits from Trains 2/3 and questioned why they have gas for those trains and not Train 1. Well Gregory it’s called having contracts.
The contract for Train 1 has expired. If your supply is limited it makes sense to supply where you have contracts and avoid legal ramifications rather than supply to where there is no contract as a favour to someone.
He made the point that demand drives exploration.
True, but Gregory, do you know we have been in a natural gas deficit position for a decade and therefore there is incentive to find more gas?
Why do you think Touchstone has been so excited about its discovery?
The energy consultant makes the point that the NGC owns significant upstream assets.
It is true that the NGC’s upstream assets have increased but it is also fact that the NGC does not have the 250 million standard cubic feet of natural gas per day (mmscf/d) that is a minimum requirement to run Train 1 at 50 per cent capacity.
One more correction, Gregory, due to debottlenecking, Train 1 requires 500 mmscf/d not 400 mmscf/d as you suggested in your explainer which the government and its supporters have used as the gold standard of intellectual prowess and understanding of the energy sector.
The whole situation reeks and the country knows it. No doubt the government hopes it will blow over.
It is a good bet they are likely to win. The question is: who is the real loser in all of this?